Health Policy Consulting and Writing to Improve Quality, Reduce Costs, and Increase Value in US Healthcare

Post navigation

Fixing or Fracturing Medicare?

Reducing Medicare spending has been one of the focal points in the debt ceiling negotiations, and it was reported that the President is considering throwing the idea of raising the eligibility age for Medicare into the pot as part of a stone soup recipe that might get enough Congressional Ds and Rs to swallow the end product.

Increasing Medicare’s Eligibility Age is Bad Policy and Worse Politics
While increasing Medicare’s eligibility age to reduce spending makes simple arithmetic sense using the formula Spending = Number of People x Spending per Person, like almost everything in healthcare, what is simple is often 30 degrees wrong. And raising Medicare’s eligibility age is no exception because it has significant fiscal and political problems.

First, that simple arithmetic formula ($=#($/#)) doesn’t account for the reality that older Medicare enrollees are more expensive than younger ones, so the savings from eliminating people who are at 65 and a few years older only saves a fraction of the average per person Medicare spending.

Second, raising the age of eligibility won’t eliminate all those people under the new enrollment age since some of them will still qualify because they are disabled or have end-stage renal disease – and these enrollees are more expensive than average too.

Third, eliminating the youngest (and least expensive) enrollees from Medicare will cause the Part B premium to increase because by law it has to account for a fixed percentage of all Medicare Part B spending.

Fourth, those individuals age 65+ who would be ineligible for Medicare would have to buy private insurance – or continue to be covered by their employers’ retiree health plans or state Medicaid programs. And just as they are generally less expensive than older Medicare beneficiaries, they are also more costly to insure than the average person under the age of 65. Which means that they (or their former employers or Medicaid – which the Federal government also partially pays for) would be paying more per/person for their insurance. AND, including these individuals in the now forming insurance exchanges would raise premiums for everyone else in the exchanges. (In a report released in March, the Kaiser Family Foundation found that raising Medicare’s eligibility to 67 in 2014 would “result in an estimated net increase of $5.6 billion in out-of-pocket costs for 65- and 66-year-olds, and $4.5 billion in employer retiree health-care costs,” as well as $0.7 billion more spending by states for their Medicaid plans in 2014.)

So the final score is bad fiscal outcomes, (Medicare is saving less money than might be quickly conceived), along with a bunch of bad political outcomes: People aged 65+ without Medicare would pay the highest private sector premiums – either directly or via their former employers or Medicaid – and middle income people on Medicare would see a Part B premium increase. Of course those effects could be mitigated by subsidizing the Part B premiums and the private sector insurance (and Medicaid) costs to lessen these impacts – and the political fallout. But then what happens to those Medicare “savings?” If that’s the “deal” that is struck, it would be a direct hit to begin fracturing the fundamental social contract that has defined Medicare since it’s founding – and subsequent whacks would likely be to incrementally increase enrollment age and otherwise cut eligibility criteria.

A Better Idea
A better solution is to actually improve Medicare – and (spoiler alert) much of what is needed to do that was contained in the ACA and the fiscal stabilization legislation. Specifically, changing incentives for providers from volume to quality and creating support for the adoption of healthcare IT systems. Neither of these will occur rapidly, but just as real medicine doesn’t cure people like Dr. McCoy did on Star Trek or Dr. House does on TV today, really changing a system as complex as the one that delivers the services that Medicare pays for won’t occur quickly. The first stones on that path have been laid (e.g. ACO concepts, advanced primary care that coordinates care, similar pilots/demos, and penalties for delivering low value care, a.k.a.”value based purchasing”), and veering off that path because it’s “hard” or not as speedy a trip as some would want, is like jumping into a turbulent river to get downstream faster without any idea where the rapids or waterfalls might be, or what carnivores (or nasty microbes) are waiting for a tasty snack.

Your email address will not be published. Required fields are marked *

Comment

Name *

Email *

Website

Check here to Subscribe to notifications for new posts

Sign-Up to Get an Email About New Posts (Free!)

Leave Blank:Do Not Change:

Your email:

About

Welcome to the Dr. Miller's Health Policy and Communications Blog. This blog was created to foster discussion and insights about how health policy and how it affects clinical and economic outcomes as part of Dr. Miller's Healthcare and Life Sciences Consulting work, which started in 2000. The focus on Dr. Miller's work for more than 25 years has been to improve the US healthcare system by engaging and educating stakeholders, and advancing the development and adoption of innovations. This blog is one route to those goals.